Emerging market weakness, lower oil may hit regional shares

Reuters

DUBAI: Stock markets in the Middle East may pull back on Sunday in line with other emerging market equities, while a retreat in oil prices may add downside pressure.

The MSCI emerging markets index fell 2.9 percent on Friday while Brent crude oil settled down at $44.75 per barrel, off 2.4 percent. It had reached a low of $44.19, the lowest since August.

Gulf bourses that are most exposed to foreign fund flows, including Dubai and Qatar, could pull back in response, while Saudi Arabian petrochemical may could see profit-taking because of weak oil.

Egypt's main index has soared 25 percent since the central bank floated the currency on Nov. 3, with foreign investors buying relatively aggressively in the latter half of last week, sending the index to fresh eight-year highs in record trading volumes.

However, Egyptian pound values of local blue chips have now largely caught up with their global depositary receipts - Commercial International Bank's last close of 67.22 pounds, for example, works out to a GDR price of $4.10 at an exchange rate of 16.40 pounds to the dollar, compared to the GDRs' last close of $4.18.

That suggests the easiest part of the Egyptian stock market's rally in response to the currency float, the revaluation of blue chips, may be ending.